Eurozone May final services PMI 47.7 vs 46.4 prelim
- Prior 47.6
- Composite PMI 48.5 vs 47.5 prelim
- Prior 48.8
Despite the troubles in France, the overall Eurozone services economy managed to hold up in May. However, private sector business activity as a whole fell to an 18-month low and marked back-to-back months of
contraction for the first time since the end of 2024.
Looking to the services sector, total new order inflows fell again for a third straight month. And while slowing from April, the pace of decline was
nonetheless the second-sharpest since November 2024.
On the prices front, the latest data showed a further intensification of
inflationary pressures across the region. Input
costs rose at the sharpest rate in three-and-half years, while
charge inflation hit a 38-month high. Trouble, trouble.
S&P Global notes that:
“With business activity in the eurozone falling for a second
successive month in May, it is looking increasingly likely
that the economy will slip into contraction in the second
quarter. The PMI data are indicating a 0.2% quarterly GDP
decline barring any significant change in June.
“Price pressures have meanwhile intensified to their
most worrying for over three years, hinting at inflation
potentially running close to 4% in the coming months.
“These price pressures will sit uncomfortably with the
ECB, which will want to be seen as acting swiftly to prevent
higher inflation from becoming entrenched. However,
policymakers will also clearly be concerned that they could
be hiking rates into a downturn, adding to recession risks.
“Hence, while one interest rate hike might be seen as
an insurance policy, the case for further rate hikes will
be harder to make if the economy continues to weaken,
not least as this softening of demand will itself constrain
pricing power and wage growth."
This article was written by Justin Low at investinglive.com.